“Money has never made man happy, nor will it, there is nothing in its nature to produce happiness. The more of it one has, the more one wants." -- Benjamin Franklin

On Apr 17, 2015

An age old question that is often asked is, Can money buy happiness? Happiness is subjective and hence to find an exact answer would be difficult. In an ideal situation, once your basic needs are met having less money should not make a person unhappy. To live you need money, either you earn it or you live off somebody’s money. When a crisis strikes you need money. When you or your loved ones have a major illness, lack of money can cause serious heartache.

I personally think there is a tenuous and need based connection between money and happiness. It is a two way street and the answer lies in how you view money and how you use it. I believe it is an individual opinion and will depend on the type of person you are. It is intricately linked to your personality. For some achievement comes first and it provides the succour that they are looking for. For some money comes first and that drives their goals and drives them to achieve. Some people may give up money to save a relationship, some others destroy relationships in the name of money.

Money begets a desire for more money. As money increases, your standard of living changes and desires change which in turn makes you want to have more money. If you look at a list of achievers and see their lives, they have not stopped at any goals, they keep getting into new ventures, expand, build on their successes. Have you ever wondered what drives them? Money, fame, satisfaction, doing something for society or building an institution? The answer will not be clear but the driving force for most is likely to be the first three mentioned.

In our life we have certain desires, some out of peer pressure, some which come up when we observe or see things in our lives. These desires may be something as small as eating in a particular Five star restaurant or vacationing in Switzerland or buying your spouse something expensive or having a house of your own. Will you be happy if you have enough money to fulfill all your desires? The answer is a big 'NO'. The world works in strange ways. The external stimuli that you receive keep your desires in perpetual motion. Take for example the news about Deepika Padukone. She has everything but still she said she was depressed and had to take professional help to come out of it! Robin Williams, the actor who embodied happiness in many films committed suicide.

Often the keeping up with the Joneses' kind of life can lead to many people taking personal loans for material possessions. Money taken on Debt can cause more harm and unhappiness. For banks and consumer durable companies promoting debt is a clever way of making money by promising happiness.

What research says

In 1974, Richard Easterlin, professor of Economics at the University of Southern California proposed a theory that came to be known as the Easterlin Paradox. He concluded that within a country, be it the United States or Bangladesh, richer people were happier than their poorer peers. The paradox came when you compared rich countries with poor ones. The paradox is that, "high incomes do correlate with happiness, but long term, increased income doesn't correlate with increased happiness". Easterlin couldn’t find any evidence that people in rich countries like the U.S. were happier than people in poor countries.

Stevenson and Wolfers, using data from 155 countries sourced from Gallup, the Pew Global Attitudes Survey and the World Bank found that as countries increase their GDP per capita, the more the happiness levels rise.

Authors Elizabeth Dunn and Michael Norton in their book, Happy Money: The Science of Smarter Spending suggests that the most satisfying way of using money is to invest in others. This can take a variety of forms, from donating to a charity that helps strangers in a faraway country to buying lunch for a friend.

Daniel Kahneman and Angus Deaton of Princeton University found that happiness did not rise after a household reached an annual income of approximately $75,000. Conclusion: When you don’t have much money, a little extra can go a long way, because you have more essential needs to fulfill. As you accumulate more wealth, however, it becomes more difficult to keep “buying” more happiness.

Prof. Howell, associate professor of psychology at San Francisco State University found that people think material purchases offer better value for the money because experiences are fleeting, and material goods last longer. But in fact, when people looked back at their purchases, they realized that experiences actually provided better value.

Researchers at the University of British Columbia and Michigan State University, conclude that while more cash doesn’t increase joy, it does decrease sadness. “Having more money provides more options for dealing with adversity.

There are so many studies giving conflicting opinions. So I guess the researchers themselves are unhappy and have really not reached a conclusion.

The primary drivers of happiness for most would be relationships, respect, recognition and as research says the happy experiences. If you take a look at everyday life it is dominated by people to people interaction and these interactions have the biggest effect on your happiness. A tiff with your colleague at work or a disagreement at home or an argument with an auto driver all contribute to irritation and unhappiness in your daily life. Money is a necessity but how much it contributes to your overall happiness is at best ambiguous.